Brokers will always provide insurance solutions for clients, he said. “But to be able to understand a clients business from the clients point of view suggests to me that we need to train educated employees and not educate untrained employees.”

Brokers also need to go beyond transactional solutions and bring new ideas to clients to help them with their business problems, which run the gamut from reducing the overall cost of risk, to, in some cases, elimination of the need for insurance.

Brokers must help clients “use their capital as efficiently as possible, and if that means to buy insurance through some other innovative means, then so be it,” he said.

Mr. Mula added that in the past clients have challenged agents and brokers, “saying they were not getting the innovation they needed, and I accept that.” Brokers should think “out of the box some more, especially since traditional insurance solutions, whether [as] a function of consolidation or a result of lack of appetite, seem to be drying up.”

The total cost of risk, including insurance, losses, frictional costs of management, technology and staff “adds up,” he noted. “I think thats where the broker really needs to partner with the client. Thats an ongoing challenge.”

Mario Vitale, chief executive officer of Willis North America in New York, said brokers need to find “even better, more efficient ways to bring creative solutions to clients' needs, make risk managers' jobs easier for them, and deliver [global] resources more effectively.”

Jim Gault, president of the brokerage services division of Arthur J. Gallagher and Company in Chicago, said the reality is that client challenges are the brokers challenges as brokers align with clients in dealing with market forces.

To determine what is going on in the market, he said, “you look at the real driverswhats going on underneath it all that is driving prices up or down.”

The drivers for commercial property- casualty business, he said, are:

The recent results of insurance carriers (what their earnings and balance sheet and reserves look like).

The front-line report (whats going on today that will show up tomorrow in the results).

Overall solvency (the ratings and strength of insurance carriers).

The tort and legal environment.

“Clearly, several of these are leaning toward a more competitive market,” he said. “The insurance markets still say they need rates, and they say they still need to repair their balance sheets. But it remains to be seen if theyll hold the line.”

In 2004, he maintained, “there will be a continued push for rate increases. Thats a general statement, because if you scratch the surface you will see that property has become more competitive,” he said.

Competition may heat up because of some clients reactions to higher rates “if the markets caught up,” he said.

He also said that one of the factors that fueled the last competitive market for so many years was interest rates. If investment income returns are on their way up to pre-bubble levels, as some economic reports indicate, “it could be a moderating [insurance] market later in the year.”

While he predicted that insurers would start the year continuing to get rate increases, he added that “how long it stays that way is anybodys guess because there are other issues that play against it.” If a catastrophe hits or if there is another insolvency of a big carrier, “all those things play into it.”

Even though there are signs that insurance markets might be open to more business than in the past, clients that havent dealt with the basics of their businessescontaining losses and good loss preventionare still going to have problems, he said.

Most clients that have been hit with substantial premium increases have gotten the message, however. “I think the clients out there understand that what drives their costs is their own experience,” he noted. “So if youve got somebody out there whos been asleep for three years with continued bad experience, theyre going to get whacked again.”

Clients with a positive loss experience will most likely find more availability. Whether theyll see a reduction in cost, however, depends on a lot of factors,” he said.

The challenge is that if competition heats up, some clients may be tempted to go for the lowest quotes, he said. However, “you dont want to run after a low quote and find out that the carrier is not financially stable enough. Youve got to do your homework,” he warned.

Willis Mr. Vitale also said that brokers are concerned with “market security and the impact this important issue has onclients and the industry.”

“A healthy industry is in everyone's best interest,” he said.

Jim Henderson, president and chief operating officer of Brown & Brown, located in Daytona Beach, Fla., noted that the flattening of pricing is a concern for brokers, since it directly affects organic growth. The brokerage, he said, has stepped up hiring this year and in 2004 to “help feed our sales force in terms of growth.”

He said B&B does not actively look to hire producers from other agencies. “That has not been workable or attractive to usOur organic growth is new products and new people.”

Mr. Henderson said market stress brought on by the displacement of companies creates “new people [to hire] and new opportunities.”

So far, he said, he has seen no backlash from the St. Paul/Travelers merger deal. However, “I think it will bring some degree of stress.” For instance, he noted, even though a carrier might have a program in place to sell rights of renewal to Travelers, “in the best of circumstances Travelers would renew less than half of that business. So the stress is, where does the other half go?”

That business would end up going to a variety of markets, “but perhaps under different terms, conditions, pricing, commission reimbursement relationships than before,” he said.

On the positive side, with chaos and stress comes opportunity. “There are accounts that may not be treated fairly by their current company or broker in that situation,” he explained. “So you open the door to other brokers that may have a better answer for that insured. And I think we are seeing that opportunity.”

He said opportunities may exist with clients unhappy because their business has been moved to a new carrier or “maybe theyve gone through three years of double-digit increases, and they question the confidence of the incumbent or the broker. Or they may need services or pricing.”

He noted that the market affords B&B good opportunities for external growth by acquiring smaller agencies of five to 40 people. “That size would be under the radar of the top brokersAon, Marsh and Willis. They probably would not have an appetite to acquire those agencies,” he said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.